If you get a second mortgage, you will basically be getting a new mortgage on your current property that already has a mortgage loan attached to it. Rather than replacing your existing mortgage, it simply becomes an addition to the title on the property.

Your lenders for your initial mortgage will always remain the priority over any other lenders. This means that if you sell your home or happen to default, the ones who will be paid first are your first mortgage lenders.

If you get one of these loans and you end up defaulting on it, your lenders will actually have to get your lenders paid off for your first mortgage before they could ever benefit from the collateral that you put forth. That is why this type of loan is considered to be significantly high risk to the lenders who extend them.

When you decide to get a second mortgage, you will generally be choosing one of two different options. The first option that you may end up choosing is called a Home Equity Line of Credit. In this case, you would have a specific limit set for you regarding the amount you are able to draw against. Most of the time there will be an open term on the loan, and you will be able to have access to the money in a way that is quite similar to using a credit card. You will probably have the option of making a cash withdrawal, or you may even be able to write out a check. Another way that you could do it is by doing an account transfer on the internet. This kind of a loan is perfect if you require instant access to the money. There is also the distinct advantage of not having to pay interest on the loan until you actually withdraw the money.

In most cases, this kind of a loan will go by the prime rate of the bank you are using, and there will be interest only payments. You will be making a payment on a monthly basis that will go towards that particular month’s outstanding balance. The lenders and banks are generally very competitive when it comes to this type of a loan.

There is another type of loan that you may choose which is a bit more traditional. It is called a Home Equity Loan. These loans come with a fixed rate, and your monthly payments are previously set for each month. In most cases you will have a higher interest rate with this kind of loan than you did for your first mortgage. However, it will probably be lower than what you would pay on a Home Equity Line of Credit. Many times people will get this kind of a loan when they require a substantial amount of money to renovate their house or even to pay for their child’s college expenses.

When deciding which type of second mortgage you want, it will basically depend upon your budget requirements in addition to the terms and conditions placed on the loan by your lender or bank.

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Category: Finances
Keywords: Second Mortgage